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MasterCard Accelerates mCommerce

In an attempt to boost its mobile money services, yesterday, MasterCard Inc. (MA) announced the initiation of a Mobile Money Partnership Program (:MMPP) to explore business opportunities within underbanked and unbanked regions in the developing regions globally.

In its initial stage of launch, MMPP aims to tap more than 2.5 billion worthy mobile consumers who are inaccessible to formal financial services such as ATMs in the emerging markets with sparse banking operations. Consequently, the program is expected to boost fund transfers, shopping and bill payments through mobile phones and global online merchant.

At its preliminary stage, MMPP will be carried out with the help of Comviva, Sybase 365 and Utiba. These are the leading providers of mobile financial services for mobile operators and financial institutions in the emerging markets. While Utiba is based in Singapore, Sybase 365 offers mobile wallet services across Europe and Latin America. Besides, Comviva deploys mobile service providers in over 90 countries to over a billion subscribers globally.

Moreover, MasterCard intends to offer a complete set of mobile financial services through MMPP. These services include prepaid companion cards, virtual card accounts as well as person-to-person payments between diverse mobile money services. Additionally, MMPP also offers face-to-face or remote mobile payments for goods and services at merchants, which do not have the conventional point-of-service acceptance.

Through MMPP platform, MasterCard is attempting to tap the business opportunities tapped by the growing needs of the underbanked economies. Of late, mobile banking has come up with a profound scope of providing the consumers with a convenient, user-friendly, value-for money, transparent and secure mode of making transactions, which include person-to-person payments, bill payments, adding cell phone minutes and other banking services.

While a sophisticated banking platform is yet to be established in most of the economies of Africa, Middle East, Latin America and Asia, mobile phones have penetrated even the remotest zones of these emerging markets. Meanwhile, the current global economy contains only about half of the world’s households that have bank accounts with an even lower proportion in developing countries. However, 7 out of 10 people across the globe are estimated to have a mobile phone.

Moreover, the combined market for all forms of mobile payments is expected to double from the current levels to more than $600 billion globally by 2013, according to Juniper Research. This paves ample scope for MasterCard to develop its mCommerce business across the emerging nations that still lay unexplored.

We believe these efforts will not only showers ample organic growth opportunities but it should also become a part of MasterCard’s long-term growth. Furthermore, this will also enhance MasterCard’s operating and competitive leverage in the upcoming quarters.

Besides, other card giants are also seeking greener pastures through newer initiatives, including the expansion into prepaid cards, mobile banking and eCommerce, given the regulatory clouds hovering over the credit and debit card businesses.

Concurrently, Visa Inc. (V) also announced that its joint venture with Monitise plc – Movida – allied with HDFC, India’s second-best private bank, in an effort to develop mCommerce offerings. The new mobile payment services offered by the alliance include bill payments, top-ups on prepaid airtime and ticket purchases across all mobile networks using any Visa and non-Visa branded payment account. These services will be available on any mobile subscriber across the nation and can be accessed even on the most basic mobile phone. The latest service is initially being offered to a select number of customers before being launched across the country later in the year.

These initiatives make an apparent fact that card giants are reaching out to the remotest rural areas of the emerging markets. Overall, these attempts are also expected to augment their core processing capabilities in an increasingly complex payments environment, thereby reflecting the endeavours to adapt themselves to the emerging industry trends.

While MasterCard carries a Zacks Rank #3, implying a short-term Hold rating, Visa carries a Zacks Rank #2, which is backed by a short-term Buy rating. However, we maintain a Neutral stance on both the card giants, over the long term.